Business Page – May 26th, 2002

Government Accounts Still in a Poor State - Auditor General

(PART 2) 

Introduction

This column’s review of the Auditor General’s Report on the Public Accounts of the Ministries/Departments/Regions for the year 2000 began last week in the form of a letter to Mr. Stanley Ming, MP of the opposition PNC-R who has made loud noises about the poor state of the financial management of the country. Many persons called me about the article noting that it was funny. That certainly was not the intention – we should all lament the manner in which taxes and borrowings are being managed at all levels of government in the country. Today’s article includes extracts from the Report and highlights some of the specific issues identified therein. Next week’s concluding piece will look at debt management, the question of governance and consider the prospects for improvement.

“The majority of Ministries/Departments/Regions violated Section 36 of the FAA Act which requires all unspent balances as at 31 December of every year to be surrendered to the Consolidated Fund. Cash books were kept open until 15 February 2001 and payments were backdated to 29 December 2000”.

“Proceeds from the Guyana Lotteries continued to be retained in a special bank account to meet public expenditure without Parliamentary approval. Such proceeds are public revenues which are required to be paid into the Consolidated Fund. As at 31 December 2000, amounts totalling $1.454 billion were received as the Government’s share of the Lotteries while payments totalling $654.239M were made”.

“The Ministry of Home Affairs transferred unspent balances totalling $17.561M on three capital programmes to the Deposits Fund bank account, instead of the Consolidated Fund, to be used in 2001. This is a serious breach of Parliamentary approval to incur expenditure”

“Significant breaches in the Tender Board Regulations at the Guyana Defence Force were again drawn to the attention of the Accounting Officer. These include the absence of a system of competitive bidding and numerous instances of contract splitting to avoid adjudication by the Central Tender Board. In addition, the involvement of the Departmental Tender Board appeared to be mere cosmetic to facilitate payments by the Sub-Treasury”. In every case, Cabinet simply waived the requirements after the breaches had been committed.

“There were numerous breaches in the Tender Board Regulations at the Supreme Court of Judicature. In particular, there was evidence of contract splitting to avoid adjudication by the Departmental and Central Tender boards. In addition, several instances of apparent misappropriation of funds were uncovered in Georgetown and other magisterial districts due to the absence of proper segregation of duties and failure to reconcile bank accounts.”

“In relation to the Ministry of Agriculture, the basis of the award of several contracts adjudicated by the Central Tender Board could not be determined because of the unavailability of the related files. A number of statutory bodies in receipt of subventions from the Ministry were also significantly in arrears in terms of financial reporting”. 

“At the Ministry of Education, the main bank account was improperly used to make advances, and at the time of reporting, 394 advanced totaling $40.387M remained outstanding. There were also 494 payment vouchers valued at $129.385M which were not presented for audit examination”.

“In relation to the Customs and Excise Department, eighty-three(83) Permits for Immediate Delivery (PID’s) valued at $531.138M had not yet been perfected at the time of the audit in August 2001.  In addition, a total of 1,069 cargo vessels arrived in port in 2000. However, completed ship’s files in respect of only 213 were made available for audit examination. The remainder were still at the various transit sheds. These two issues are significant enough to affect the collectibility of revenue. In relation to the Inland Revenue Department, there were 3,547 registered companies. However, only 691 submitted annual returns”.

“In relation to the Ministry of Public Works, a number of irregularities were uncovered mainly in relation to building contracts. An official of the Ministry was in collusion with certain contractors, and in a number of cases there were overpayments on the contracts. These matters were referred to the Police for investigation. The bridge at Mandella Avenue was also poorly constructed, resulting in a final construction cost of approximately $25M, including rectification costs”.    

Ministry of Foreign Affairs

This section of the Report runs from pages 97 to 161 and is as much an indictment of the quality of the management of this country’s foreign relations as of the neglect of the basic principles of financial management. The Report refers to the case where a remittance of US$1,003 sent seven months earlier and destined for transmission to the Consolidated Fund was “still being held in an envelope in the Ministry’s safe” and the non-reconciliation of several of the Missions’ bank accounts for extended periods.

The foreign offices are all understaffed in many cases in critical positions. The Auditor General’s request for information on the required staff levels in some of the Consulates was not met, the Permanent Mission to the all-important United nations was without an Ambassador at the time of the visit, as was the Guyana Embassy in Brussels, there was little segregation of duties, some of the premises (embassies as well as residences) and furniture (e.g. Cuba) were in a state of disrepair, buildings rented for substantial sums being unoccupied sometimes for years as in the case of China for which rent of US$85,071 was paid for 2000 even though there was no Ambassador since 1994! As usual, several of these issues were raised in earlier reports which included recommendations of the diplomatic and administrative staff of these offices. It seems that little or no action has been taken while Parliament continues to finance this extra-ordinary state of affairs.

Statement of Loans

The Statement of Outstanding Loans and Advances made from the Consolidated Fund shows $5.250 billion owing by Public Corporations including fifteen loans granted to the Guyana Electricity Corporation and Linden Mining Enterprise. The Report raises doubts about the recoverability of $3.668Bn.as well as the recoverability of $439mn owed to the government by the former Guyana Airways Corporation, $610Mn. by the Guyana Electricity Corporation and $500Mn. by Mards Rice Milling Company Ltd.

Also included in the figure of $5.250 billion are amounts totalling $5.601M for which there are no records and which appear to have have been outstanding for a minimum of nineteen (19) years without evidence of any action being taken to recover them! 

Other Issues

The Report comments that the Presidential Guard ($115Mn), Castellani House($18Mn), and the Joint Intelligence Co-ordinating Agency ($5M) are departments in the Office of the President and therefore ought not to be in receipt of a subvention. The same comment has been made in respect of several departments of the Ministry of Finance which despite repeated critical comments by the Auditor General continue to receive subventions from Parliament.

The Report notes that “the implications of having the operations of these units financed under contributions to local organisations are two-fold. The first is that Employment Costs and Other Charges are not categorised and shown in the Appropriation Account in the traditional manner, thereby distorting the true costs involved in respect of these two areas. Secondly, the present arrangement facilitates the circumvention of the application of the Government’s pay scales as employees of these units enjoy enhanced compensation packages, instead of the approved Government rates.”

The Report identifies several entities which are given subventions year after year despite their failure to submit financial statements for audit. Most notably is the Guyana National Energy Authority (GNEA) was established by the Energy Act No. 2 of 1981 and is subject to separate financial reporting and audit.  The last set of audited accounts was in respect of the year 1984, and therefore the Authority was in sixteen (16) years in arrears in terms of financial reporting.

The Report also notes that the Students Loan Programme at the University of Guyana which commenced in 1994 had paid over some $2.533 billion were paid over to the Loan Agency. The Report further notes that the Loan Agency is not a separate legal entity and therefore there is no requirement to have annual financial reporting and audit recommends that the Agency be given statutory status as early as possible. It acknowledges however that since 2000, financial statements for the years 1994 to 1998 have been submitted for audit.

Poverty Programme

Of the sum of $235.333M voted for providing special support for the most vulnerable groups in the country $222.120M was expended principally through the Office of the President $117.5M, the Ministry of Human Services ($41.1M), Ministry of Works ($24.8M), the Ministry of Agriculture ($10m). Of the amount spent through the OP, rice and sugar farmers received $30.6M through the Ministry of Agriculture which in turn paid over $20M to the Guyana Rice Development Board. Not only were there no details of any payments made by the GRDB but the question of the capacity of that organisation to manage such funds arises since it would seem appropriate for the Ministry of Human Services/ SIMAP to manage such resources.

To be continued